SAP Shares Soar to All-Time High Following Strong Q2 2024 Results

SAP' stock rises after KeyBanc, JMP keep bullish views following strong Q2

SAP's (NYSE:SAP) stock rose about 6% premarket on Tuesday after Wall Street firms maintained their bullish view on the German software company following second quarter results and outlook. KeyBanc Capital Markets kept its Overweight rating and price target of €230 on SAP but updated its estimates to reflect the results of the quarter. Analysts led by Jackson Ader noted that SAP is again kicking off the earnings season with solid results and some additional company-specific tailwinds, though, this time on margins. Revenue came in slightly ahead of expectations, but it was the acceleration of Cloud ERP Suite revenue and current cloud backlog growth, that they see as the two most important line items that bulls will focus on. In a brief follow-up to KeyBanc's cloud transition deep dive, the analysts noted how the drivers of SAP's top line are generally within SAP's control; they are SAP-specific. With the margin performance in the quarter and the increased expectation for margin in 2025 thanks to an expansion of the existing restructuring program, it is clear that both the top and bottom lines have levers that management can pull for better operations and financials. The analysts continue to like the spot SAP is in. Cloud ERP Suite revenue came in at €3.414B compared to KeyBanc's estimates of €3.364B and the Street's €3.379B estimate, seeing an acceleration back to 33% growth in constant currency compared to KeyBanc's 32.7% estimate entering the quarter. Current cloud backlog grew 28.4%, also an acceleration over the first quarter of 2024's 27.2% mark, while calculated current cloud bookings came in at 29.1% compared to 32.1% growth last quarter. These are the two most important top-line metrics, signaling encouraging quality in the beat, according to the analysts. The analysts added non-IFRS, EBIT margin was 23.4% in the quarter, 180 bps ahead of KeyBanc's expectation, with each expense line item coming in below the analysts' estimate on a euro basis, not just as a percent of revenue. JMP Securities maintained its Market Outperform rating on SAP and increased its price target on the stock to $245 from $220. Analysts led by Patrick Walravens noted that the company reported strong second quarter results with non-IFRS EPS of €1.10 (consensus €1.08) and operating profit of €1.94B (consensus €1.81B) on total revenue of €8.29B (consensus €8.24B), up 10% year-over-year in constant currency, an acceleration from 9% last quarter; cloud growth of 25% in cc, flat with last quarter; and current cloud backlog growth of 28% cc, also flat with last quarter. The analysts also continue to like SAP as an attractive opportunity for capital appreciation for several reasons: SAP's growth formula is working with RISE to help convert the €11B support stream to the cloud at a 2x-3x multiple and GROW to address greenfield opportunities, making it easier for SME customers or business units within a larger enterprise to implement S/4HANA Public Cloud; the company addresses a large total addressable market, or TAM, which is expected to reach $670B in 2025; SAP Business AI is accelerating the pace of innovation in both RISE and GROW, and "almost 20% of all deals [in the second quarter] included premium AI use cases," according to the analysts. SAP (SAP) has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' average rating is also Hold, but the average Wall Street analysts' rating is more positive with a Buy. More on SAP SAP SE (SAP) Q2 2024 Earnings Call Transcript SAP SE 2024 Q2 - Results - Earnings Call Presentation SAP: Expensive Cloud Growth SAP gains after Q2 results, guidance meet expectations; gives restructuring update SAP SE Non-GAAP EPS of €1.10, revenue of €8.29B

Shares of German tech giant SAP soar after upbeat Q2 2024 results

SAP's Q2 2024 results show a 10% revenue increase to €8.29 billion, driven by a 25% rise in cloud revenue. Shares opened 5% higher, hitting record highs. SAP SE unveiled its Q2 2024 financial results on Monday after market close, showcasing a robust performance driven by significant strides in cloud revenue and strategic advancements in business AI. Shares of SAP opened 5% higher on Tuesday at €193, reaching new record highs and on course for the best one-day performance since January. The German tech giant reported total revenue of €8.29 billion for Q2 2024, a 10% increase compared to the same period last year, surpassing market expectations of €8.25 billion. This growth was predominantly driven by a 25% surge in cloud revenue, reaching €4.15 billion. The Cloud ERP Suite played a pivotal role, recording a 33% rise to €3.41 billion. Additionally, SAP's current cloud backlog, which represents contractually committed cloud revenue expected over the next 12 months, climbed by 28% to €14.81 billion. SAP maintained solid margins, including a cloud gross margin of 73%, a cloud and software gross margin of 80%, and an overall gross margin of 72.6%. The company reported a 59% increase in earnings per share (basic), reaching €1.10, surpassing market expectations of €1.06. Chief executive officer Christian Klein noted that SAP's cloud growth momentum remained strong in the second quarter, bolstered by the integration of business AI, which enabled numerous deals. Klein commented, "We continue to execute on our transformation with great discipline, leading to an increase in our operating profit ambition for 2025. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027." "We are staying squarely focused on delivering our outlook for this year. Our current cloud backlog growth during the second half of 2024, and especially in Q4, will be decisive to lay a solid foundation for our cloud revenue ambition for 2025," chief financial officer Dominik Asam noted. He also emphasised the company's commitment to its transformation plan, aiming to achieve the 2025 free cash flow ambition despite anticipated restructuring costs spilling into next year. SAP's cloud revenue growth was impressive across all markets. In the Americas, cloud revenue increased by 18%, with Brazil and Canada demonstrating exceptional growth, and the US performing particularly well. In the EMEA region, cloud revenue surged by 32%, with Germany and Saudi Arabia contributing significantly. The Asia Pacific region recorded a 33% increase in cloud revenue, with standout performances from India, Japan, South Korea, and China. As part of its strategic focus for 2024, SAP is amplifying its efforts in business AI, restructuring its operations to harness AI-driven efficiencies and scalability. This transformation is supported by a company-wide restructuring programme expected to conclude by early 2025, aiming to align SAP's skillset with future business needs. The restructuring is expected to impact 9,000 to 10,000 positions, predominantly through voluntary leave programmes and internal re-skilling initiatives. Despite these adjustments, SAP expects to maintain a headcount comparable to that at the end of 2023.

SAP Shares at All-Time High After Adjusted Profit Beats Market View

FRANKFURT (Reuters) - Shares in SAP rose as much as 7% to reach an all-time high on Tuesday after Europe's largest software maker reported better-than-expected quarterly operating income, buoyed by revenue growth and intensified cost-cutting. The German company, whose software is used to run operations from accounting to supply chain management, said late on Monday that second-quarter operating profit adjusted for special items jumped 33% to 1.94 billion euros ($2.1 billion), beating a median analyst estimate of 1.81 billion posted on SAP's website. SAP shares were up 6% at 0725 GMT, with Stifel analysts calling it a "strong operational quarter". The software maker also ramped up its restructuring efforts, saying that about 9,000 to 10,000 positions would be affected, up from 8,000 announced in January. It said most employees affected would be retrained with artificial intelligence (AI) skills or would receive voluntary buy-out packages. "We continue to invest into our transformation to be the leader in Business AI. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027," CEO Christian Klein said in statement. The company's total quarterly revenue rose 10% to 8.29 billion euros, edging past analysts' consensus of 8.25 billion euros, helped by demand for its business planning software. Cloud revenue of 4.15 billion euros was in line with the analyst consensus. The firm also increased its 2025 adjusted operating profit expectation to 10.2 billion euros from 10 billion euros previously, reflecting anticipated efficiency gains from its transformation programme. ($1 = 0.9185 euros) (Reporting by Ludwig Burger and Gursimran Kaur; writing by Miranda Murray; Editing by Jacqueline Wong and Louise Heavens)

SAP shares at all-time high after adjusted profit beats market view

FRANKFURT, July 23 (Reuters) - Shares in SAP rose as much as 7% to reach an all-time high on Tuesday after Europe's largest software maker reported better-than-expected quarterly operating income, buoyed by revenue growth and intensified cost-cutting. The German company, whose software is used to run operations from accounting to supply chain management, said late on Monday that second-quarter operating profit adjusted for special items jumped 33% to 1.94 billion euros ($2.1 billion), beating a median analyst estimate of 1.81 billion posted on SAP's website. SAP shares were up 6% at 0725 GMT, with Stifel analysts calling it a "strong operational quarter". The software maker also ramped up its restructuring efforts, saying that about 9,000 to 10,000 positions would be affected, up from 8,000 announced in January. It said most employees affected would be retrained with artificial intelligence (AI) skills or would receive voluntary buy-out packages. "We continue to invest into our transformation to be the leader in Business AI. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027," CEO Christian Klein said in statement. The company's total quarterly revenue rose 10% to 8.29 billion euros, edging past analysts' consensus of 8.25 billion euros, helped by demand for its business planning software. Cloud revenue of 4.15 billion euros was in line with the analyst consensus. The firm also increased its 2025 adjusted operating profit expectation to 10.2 billion euros from 10 billion euros previously, reflecting anticipated efficiency gains from its transformation programme. ($1 = 0.9185 euros) (Reporting by Ludwig Burger and Gursimran Kaur; writing by Miranda Murray; Editing by Jacqueline Wong and Louise Heavens)

CFRA boosts SAP stock price target by 17%, reaffirms Buy rating By Investing.com

On Tuesday, CFRA, a notable equity research firm, upgraded its price target for SAP AG (NYSE:SAP) shares from the previous $198.00 to $232.00, while reaffirming a Buy rating on the stock. The adjustment comes after SAP reported its second-quarter earnings per share (EPS) of EUR 1.10, surpassing the consensus estimate of EUR 1.09. The company saw a 10% increase in sales, closely aligning with market expectations. This was attributed to a robust 25% growth in cloud services, which somewhat cushioned the impact of a 5% decline in software licenses and support. The firm's analyst noted the positive trend in SAP's profit mix, highlighting an expansion in cloud gross margin to 73.3% from 71.4%. This margin improvement is significant as cloud services now account for over 80% of the company's profits compared to the corporate average of 72.7%. Additionally, the cloud backlog growth, which is an indicator of future revenue, increased by 28%, building on the 27% growth observed in the first quarter. The cloud-based ERP suite from SAP experienced a notable 33% uptick. SAP's financial outlook for 2024 remains robust, according to CFRA, with the anticipation of further efficiencies contributing to an upside in the 2025 margin projections. The research firm has adjusted its 2024 EPS forecast for SAP to EUR 4.66 from EUR 4.35 and its 2025 estimate to EUR 6.15 from EUR 6.00, initiating a 2026 EPS projection at EUR 7.03. The valuation is based on a price-to-earnings (P/E) ratio of 30 times the firm's 2026 EPS forecast, which is above the average of SAP's peers and historical figures, largely due to the company's artificial intelligence (AI) prospects. The analyst also emphasized the potential of SAP's Business AI initiatives and strategic partnerships in sustaining the company's financial outlook for 2024, while also improving efficiency margins for 2025. By 2025, cloud revenues are expected to represent 56% of total sales, with predictable revenues projected to reach 86%. SAP is actively integrating AI tools such as Joule into its RISE program for consultants and developers, which is anticipated to enhance the monetization of AI as the company shifts towards premium services. In other recent news, SAP SE (ETR:SAPG) has seen a series of positive developments. The company has reported a 10% growth in its Cloud & Software segment and has exceeded analyst expectations in its operating margin. These improvements have led TD Cowen to maintain a Hold rating on SAP shares, while raising the price target from $188.00 to $214.00. Additionally, SAP's Cloud ERP Suite revenue has grown, leading BMO Capital Markets to increase its price target for the company to $248. Analysts from Jefferies and HSBC (LON:HSBA) have maintained a "Buy" rating on SAP's stock, with Jefferies raising its price target and HSBC increasing it to €200. JMP Securities also provided a "Market Outperform" rating with a price target of $220. SAP's strategic initiatives such as the acquisition of WalkMe and the rollout of the Joule solution have been noted as significant moves in transitioning its customers to cloud-based solutions. InvestingPro Insights With SAP AG (NYSE:SAP) showcasing a strong financial performance and CFRA raising its price target, investors may find additional context from InvestingPro metrics and tips useful. SAP's market capitalization stands at a robust $246.19B, reflecting its significant presence in the industry. The company's P/E ratio, currently at 47.29, suggests a premium valuation possibly due to its growth prospects and innovation in the cloud and AI sectors. Investors should note that SAP has maintained a consistent dividend for 33 consecutive years, indicating a commitment to shareholder returns. Additionally, the firm's revenue growth over the last twelve months was 5.36%, underscoring steady business expansion. Among the myriad of InvestingPro Tips, a couple stand out in light of the article: SAP is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to growth-oriented investors. Moreover, the company is acknowledged as a prominent player in the software industry, reinforcing its market position. For those interested in a deeper dive, there are 11 more InvestingPro Tips available, which can be accessed with the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. These insights complement the positive outlook presented by CFRA, offering investors a broader perspective on SAP's financial health and market standing.

SAP gains after Q2 results, guidance meet expectations; gives restructuring update

SAP (NYSE:SAP) shares rose 4.4% in extended-hours trading on Monday after the European software giant reported second-quarter results and guidance that were largely in-line with expectations. For the period ending June 30, SAP earned an adjusted €1.10 per share, as revenue rose 9.8% year-over-year to €8.29B. Cloud revenue came in at €4.15B, while cloud and software revenue for the period was €7.175B. SAP ended the period with a current cloud backlog of €14.8B, up 28% in constant currency. A consensus of analysts expected the company to earn $1.08 per share on $8.98B in revenue. Looking ahead, SAP expects to generate between €17B and €17.3B in cloud revenue in constant currency for the full year, up 24% to 27% Cloud and software revenue is expected to be between €29B and €29.5B, up 8% to 10% at constant currencies. The company also said it expects non-IFRS operating profit to rise between 17% and 21% at constant currencies to be between €7.6B and €7.9B, while free cash flow will be approximately €3.5B for the full-year. SAP ended the quarter with approximately €1.87B under its share repurchase program. In addition, SAP said that its restructuring program, first announced in January, is expected to conclude in early 2025 as the company looks to increase its focus on artificial intelligence. In total, roughly 9,000 to 10,000 positions are expected to be impacted, with the "majority" covered by voluntary leave programs and internal re-skilling measures. Restructuring expenses during the second-quarter were €0.6B, while they were €2.9B for the first-half of the year. "Overall payouts associated with the program are currently expected at approximately €3 billion, of which a mid-triple-digit million amount is expected to occur in 2025," SAP said. The company will host a conference call at 5 p.m. EST to discuss the results. More on SAP SE SAP: Expensive Cloud Growth SAP: Incredible Performance, Terrible Price SAP: Strong Cloud Revenue To Continue Supporting Premium Valuation SAP SE Q2 2024 Earnings Preview SAP ticks up as BMO upgrades on back of 'high visibility' into bookings, revenues

SAP Q2 results top estimates as ongoing cloud demand boosts revenue By Investing.com

Investing.com -- SAP reported Monday fiscal second-quarter results that topped Wall Street estimates as its cloud business was boosted by growing enterprise demand for its artificial intelligence offering. SAP SE ADR (NYSE:SAP) rose nearly 5% in aftermarket hours trading following the results. For the three months ended Jun. 30, SAP reported adjusted earnings of €1.10 per share on revenue of €8.29B, compared with estimates for €1.09 on revenue of €8.26B. The beat was fueled by cloud growth momentum, which "remained strong in Q2, with Business AI enabling many deals," the company said. Cloud and software revenue jumped 10% to €7.17B in Q2 year on year and the software maker continues to win new business, boosting its current backlog. Current cloud backlog jumped to 28% to €14.8B. Looking ahead, the tech company reiterated its outlook for the full-year, forecasting adjusted operating profit between €7.6B and €7.9B on cloud revenue in a range of €17.0B to €17.3B.

SAP posts solid results and raises profit target for 2025 - SiliconANGLE

SAP SE posted second-quarter revenue and operating profit that beat analyst expectations and raised 2025 operating profit projections, sending the enterprise software maker's stock up more than 4% after hours. Revenue rose to $9.02 billion from $8.22 billion in last year's second quarter and beat analysts' consensus forecast of $8.98 billion. Cloud and software revenue was $7.82 billion, up from $7.09 billion a year earlier. Software license revenue fell 27% as customers shifted to cloud subscriptions. Operating profit rose to $2.11 billion from $1.59 billion. Analysts had expected $1.97 billion. SAP said its current cloud backlog rose 28%, to $16.12 billion, and cloud revenue grew 25% on the strength of 33% growth in the company's cloud-based enterprise resource planning suite. The share of more predictable revenue, an important indication of business stability, grew two percentage points, to 84%. Cloud gross profit rose 29%. Earnings per share jumped 59%, to $1.20. "We continue to deliver despite the volatile environment in the software industry," said Chief Executive Christian Klein (pictured), whose contract was extended through April 2028 earlier this year. "More and more customers are moving to the cloud, and our portfolio is becoming more attractive thanks to our artificial intelligence capabilities." That's principally Joule, the generative AI assistant SAP introduced last fall that allows customers to query data from both SAP and third-party systems in natural language. "In every deal we closed, our AI played a role," Klein said. "Joule is becoming our new user experience." The company said its "RISE with SAP" digital transformation initiative continues to drive strong growth, with 18 new named enterprise accounts signed during the quarter. An additional half-dozen large companies each went live on SAP S/4HANA Cloud and "GROW with SAP," an offering aimed at helping customers reliably and speedily adopt cloud ERP. Klein said 60% of the customers it signed in the quarter were new to SAP. "RISE brings best-of-suite ERP to our installed base. GROW is the perfect choice for greenfield projects and net new customers," he said. "Once we have landed with RISE and GROW, we go into expand mode." Klein said the company is "confidently raising the operating profit and ambition through 2025." It now expects 2025 operating profits of $11.1 billion compared to a previous forecast of $10.9 billion. One reason is the strong progress SAP said it's making on an ongoing transformation program that aims to drive efficiency improvements through the internal use of AI. In January, it announced a company-wide restructuring program that will eliminate up to 10,000 jobs, mostly through voluntary attrition and retraining. Klein said the company continues to hire "only for the skill sets we need" and will end 2024 with about as many employees as at the end of last year. It took additional a restructuring charge of $650 million in the quarter and estimated the total cost of the program will exceed $3 billion by the end of this year. However, Klein said the short-term restructuring charges will be more than made up by long-term savings. "We are focusing on simplifying our go-to-market and expanding our channel program," he said. "Expected savings are in the triple-digit range."

SAP shares jump after AI demand boosts cloud revenue by 25%

(Bloomberg) -- SAP SE shares rose the most since January after the German software company reported a surge in cloud revenue growth, helped by corporate customers' demand for services to run artificial intelligence applications. Adjusted cloud revenue rose 25 per cent at constant currencies in the second quarter from a year earlier to €4.15 billion (US$4.52 billion), the Walldorf-based company said in a statement late Monday. That compares with the average estimate of €4.16 billion from analysts surveyed by Bloomberg. SAP has promoted its cloud business by bundling it with AI tools to incentivize customers to make the shift, moving users to the more lucrative subscription model and away from on-premise licenses. Its current cloud backlog, an indication of future revenue, grew by 28 per cent to €14.8 billion last quarter. SAP shares jumped 6.9 per cent to €196.20 at 12:19 p.m. in Frankfurt trading after earlier gaining as much as 7.3 per cent, the biggest intraday increase since January. The stock has increased about 40 per cent this year. "Our cloud momentum is continuously strong, backed by very strong results in business AI," Chief Executive Officer Christian Klein said in an interview on Bloomberg Television. SAP's business AI products influenced "every single deal in Q2." SAP is standing out from peers including Salesforce Inc. and Workday Inc., which had given disappointing outlooks this year as the AI boom has primarily helped hardware and chip firms. Klein said the company's focus on more in-depth business transformation was helping it win market share. The company reiterated its 2024 outlook and slightly raised its 2025 profit forecast, which Klein attributed to an internal rollout of AI that was making the business more efficient. SAP now expects operating profit of about €10.2 billion, compared to €10 billion previously. SAP expanded its restructuring plan and said the program will affect 9,000 to 10,000 positions, up from the 8,000 jobs it had previously announced. SAP said restructuring costs, which are focused on adding new skillsets rather than reducing total headcount, in the first half were €2.9 billion and overall expenses related to the program will be about €3 billion. It previously estimated they would be around €2 billion. JPMorgan analysts including Toby Ogg said that despite problems in the broader software sector, SAP was showing strong signs growth. The maintained free cash flow targets for 2025, taking into account a costly restructuring program, reflect "robust financial management," he added.

SAP Stock Is Up After Q2 Results: Here's A Look At The Details - SAP (NYSE:SAP)

Quarterly sales come in at $8.92 billion which misses the analyst consensus estimate of $8.96 billion by 0.42%. SAP SE SAP reported its second-quarter financial results Monday. Here's a look at the details from the report. The Details: SAP reported quarterly earnings of 82 cents per share which missed the analyst consensus estimate of $1.19 by 31.26%. Quarterly sales came in at $8.92 billion which missed the analyst consensus estimate of $8.96 billion by 0.42% and represents an 8.81% increase over sales from the same period last year. Cloud revenue grew 25%, underpinned by 33% Cloud ERP Suite revenue growth, all at nominal and constant currencies, and the company reported its current cloud backlog increased by 28%, both at nominal and constant currencies. IFRS cloud gross profit grew 29% and non-IFRS cloud gross profit grew 28%. Read Also: SunPower Stock Attempts To Bounce Back: What's Going On? "Our cloud growth momentum remained strong in Q2, with Business AI enabling many deals. We continue to execute on our transformation with great discipline, leading to an increase in our operating profit ambition for 2025. At the same time, we continue to invest into our transformation to be the leader in Business AI. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027," said Christian Klein, SAP's CEO. Outlook: SAP reiterated its fiscal year 2024 outlook and sees cloud revenue in a range of $18.5 billion and $18.84 billion and non-IFRS operating profit between $8.28 billion and $8.6 billion. The company expects fiscal year 2025 cloud revenue of more than $23.41 billion and non-IFRS operating profit of approximately $11.11 billion. SAP Price Action: According to Benzinga Pro, SAP shares are up 4.80% after-hours at $210.10 at the time of publication Monday. Read Next: What's Going On With Coinbase Shares Today? Image: Courtesy of SAP Market News and Data brought to you by Benzinga APIs

Savings lift SAP to record high - deja vu

(new: analyst comments, share price review and Borsen value) FRANKFURT (dpa-AFX Broker) - The prospect of more savings at SAP ensured enthusiastic investors and a share price at a record high on Tuesday. At its peak, the share price was up 7.1 percent, not far from the 200-euro mark. The software developer was thus worth a good 240 billion euros. Most recently, the increase amounted to almost 7 percent to 196 euros. Instead of 8,000 jobs, the Walldorf-based company now wants to cut 9,000 to 10,000 jobs. Although this will initially cost money, SAP expects costs to be around 0.2 billion euros lower than previously planned from next year. The company also wants to earn around 10.2 billion euros in earnings before interest and taxes (EBIT) adjusted for special effects in 2025 instead of around 10 billion euros. Tuesday saw a repeat of the Borsen reaction from the end of January to SAP's figures for the final quarter of 2023: At the time, the announcement of job cuts and investments in artificial intelligence had also sent the share price to a record high, rising by a good 8 percent at its peak. In the months that followed, the share price continued to rise. With a market capitalization of a good 240 billion euros, SAP is now worth around 100 billion euros more than the number two in the DAX, Siemens AG. "A major restructuring program should pay off in greater operating efficiency," wrote analyst Nay Soe Naing from Berenberg Bank on the foreseeable lower costs of the Group. He therefore assumed that the company would be more profitable from 2025 onwards. In addition, SAP had set itself apart from its competitors in operational terms in the second quarter, Naing added. While other cloud providers have recently reported weaker demand, SAP's growth in the cloud business is robust. "We remain buyers of the shares," concluded the expert. Sven Merkt from the British investment bank Barclays took a similar view: "With its strong business performance, SAP is increasingly standing out compared to its competitors". The latter were suffering from economic weakness, while the Walldorf management could not see this as a burden on demand. Merkt advised overweighting SAP shares in the portfolio. Like other tech stocks, the shares have been benefiting from the artificial intelligence megatrend for some time. In 2024 alone, the share price has risen by around 40 percent so far, which means one of the top places in the leading German DAX index. In terms of market capitalization, SAP has long been the undisputed number one on the Dax. With a market capitalization of around 240 billion euros, the Group is well ahead of number two Siemens, which weighs in at around 140 billion euros./bek/men/mis

SAP cuts more jobs - operating profit grows strongly - share price jumps

WALLDORF (dpa-AFX) - Europe's largest software manufacturer SAP is expanding its job reduction program due to the high demand among employees. Although this will initially cost a little more money, it will also lead to more savings than previously planned. Because the job cuts are progressing faster than expected and many new hires are not due until the second half of the year, the operating result for the months of April to June was unexpectedly good. The share price soared to a record high on Tuesday. Shortly after the start of trading, SAP shares rose by a good six percent to 194.84 euros. Like other tech stocks, the shares have been benefiting from the artificial intelligence megatrend for some time. In 2024 alone, the share price has risen by around 40 percent, putting it among the top positions in the leading German DAX index. In terms of market capitalization, SAP has long been the undisputed number one on the Dax. With a market capitalization of almost 240 billion euros, the company is well ahead of number two Siemens, which has a market capitalization of around 140 billion euros. Instead of 8,000 jobs, 9,000 to 10,000 jobs are now to be cut, as the Walldorf-based company announced on Monday evening after the US stock exchange closed. In the second quarter, the DAX-listed company therefore also recorded additional restructuring expenses of 0.6 billion euros. From 2025, SAP expects costs to be around 0.2 billion euros lower than previously planned. In terms of earnings before interest and taxes (EBIT) adjusted for one-off effects, SAP aims to earn around 10.2 billion euros in the coming year instead of around 10 billion euros. The Group had previously estimated the cost effect of the job cuts at around 500 million euros per year. The management confirmed the forecasts for the current year, while the sales outlook for 2025 also remains unchanged. In the morning, a trader saw the reaffirmed outlook for the current year as a thoroughly conservative stance, meaning that positive surprises are possible. The operating result grew by a third year-on-year to 1.94 billion euros in the second quarter. Analysts had expected an increase of 24 percent. Turnover climbed by 10 percent to 8.29 billion euros. The cloud business in particular continued to set the pace with growth of 25 percent. In an initial reaction, Jefferies analyst Charles Brennan spoke of a "squeaky clean quarter". The Walldorf-based company had "more than just cleared the hurdle" The North Baden-based company was also able to significantly increase bookings for the subscription software in the cloud for use over the network over the next twelve months. The management had already indicated that it did not see any significant slowdown in business despite the often adverse economic conditions. Some competitors had disappointed with their figures in recent months and reported hesitant customer behavior. Management's comments on the results in the conference call were also solid in terms of the order backlog, explained analyst Toby Ogg from the bank JPMorgan. It was indicated that July had had a "good start" and that SAP had not felt any economic impact so far. Net profit fell significantly in the second quarter by 69 percent to 918 million euros. This was due in particular to the billion-euro extraordinary income from the sale of the former US subsidiary Qualtrics a year earlier, but also to the additional provisions for the increased job cuts. SAP announced the job cuts in January, citing the need for new jobs within the company, particularly in the field of artificial intelligence, as the main reason for the restructuring. The majority of the employees affected were also to leave the company, while the rest can continue their training or apply for other positions, according to the company. SAP continues to invest in its goal of becoming the leading provider of enterprise AI, said Group CEO Christian Klein. "Based on our progress and strong order pipeline, we are confident of achieving accelerated revenue growth by 2027." There had already been indications that the severance and early retirement programs were well received by employees. Older employees, who tend to receive higher salaries, are usually eligible for this. Younger employees ensure lower salary costs on average. The Group expects the number of employees at the end of this year to be similar to the 107,602 full-time positions at the beginning, as the software giant intends to continue hiring new people. At the middle of the year, there were 105,315 full-time positions, which is noticeably fewer than six months previously. Chief Financial Officer Dominik Asam said in a conference call that hiring is likely to increase in the second half of the year./men/he/mis/jha/

German software maker SAP's quarterly cloud revenue leaps 25%

Cloud revenue of 4.15 billion euros was in line with the median analyst estimate from a consensus posted on the company's website. The German firm increased its 2025 adjusted operating profit expectation to 10.2 billion euros from 10 billion euros, reflecting anticipated efficiency gains from its transformation program. "We continue to invest into our transformation to be the leader in Business AI. Given our progress and strong pipeline, we are confident to achieve accelerating topline growth through 2027," CEO Christian Klein said in statement. The company said quarterly operating profit fell 11% to 1.22 billion euros, due to restructuring expenses of 600 million euros. SAP in January said it would spend 2 billion euros on a restructuring programme involving 8,000 jobs to either retrain employees with AI skills or to replace them through voluntary redundancies. The company's software is used to manage key operations ranging from accounting to supply chain management. (Reporting by Ludwig Burger and Gursimran Kaur; Editing by Sriraj Kalluvila)

SAP: AI-Focused Restructuring to Add €200 Million to Bottom Line

Seven months after launching an artificial intelligence (AI)-focused restructuring program, SAP said Monday (July 22) that it has raised its 2025 operating profit ambition to reflect the efficiency gains it expects to see from that program. "We continued to execute on our transformation program with great discipline with rehiring only for the skill sets we need," SAP CEO Christian Klein said Monday during the company's quarterly earnings call. "As you have seen, we are increasing the volume of the program. That's why we are able to announce an upgrade of roughly €200 million on the bottom line of our Ambition 2025." SAP now expects non-International Financial Reporting Standards (IFRS) operating profit of €10.2 billion (about $11.1 billion) in 2025, up from its previous forecast of €10 billion (about $10.9 billion), according to a Monday earnings release. The enterprise application software company announced the restructuring program in January, saying that it will increase its focus on Business AI and other key strategic growth areas and will transform its own operational setup to capture AI-driven efficiencies. SAP added that it expected to see 8,000 employees either be retrained or leave the company under a voluntary leave program. In its Monday earnings release, SAP said it now expects the restructuring to affect 9,000 to 10,000 employees as it works to ensure that the company's skillset and resources will meet its future needs. As it reinvests in strategic growth areas -- Business AI, in particular -- it expects its headcount at the end of 2024 to be similar to what it had at the end of 2023. SAP expects to complete the restructuring program in early 2025, according to the release. Together with making progress on its restructuring, SAP made some other moves related to AI during the second quarter, per the earnings release. These include the addition of AI features to the supply chain solutions it offers its customers, an extended collaboration with IBM that includes new generative AI capabilities, and an expanded collaboration with Amazon Web Services (AWS) that includes cloud enterprise resources planning (ERP) experiences and generative AI offerings. Klein said during the call that SAP is receiving more positive feedback than ever about its products, due to its Business AI offerings; that everyone perceives SAP as a major AI player because it can embed the technology in the operating systems of its customers; and that the company's AI strategy played a key role in every deal it closed during the quarter. SAP also said in the Monday earnings release that its cloud revenue grew 25% year over year during the quarter, outpacing its total revenue, which was up 10%. "Despite the volatile environment in the software industry, our growth momentum remained strong in Q2," Klein said during the call. "More and more customers are moving to the cloud, and our portfolio is becoming ever more attractive, thanks to SAP's Business AI capabilities."

Now as many as 10,000 SAP jobs to be hit by restructure

Revenue and underlying profit please markets in Q2 as German software giant retains focus on costs SAP has expanded the number of jobs affected by its restructuring program by up to 20 percent after generating higher revenue but lower operating profit in the most recent full quarter. In January, the ERP and enterprise software biz said the restructure was likely to impact 8,000 positions worldwide. However, the European Works Council later described this as a "euphemism" for headcount reduction. Announcing calendar Q2 results to financial markets last night, the German tech vendor said it was upping the figure. CFO Dominik Asam told investors: "We now estimate that between 9,000 and 10,000 positions will be affected with the corresponding impact on restructuring provisions, cash out and run rate savings after completion of the program. As compared to what we had indicated in the first quarter, we added about €800 million of restructuring expenses and cash out. "It's important to note that the increase in the number of affected positions does not imply complete elimination of these roles but allows us to refine our setup in terms of skills and locations." In Q2, total revenue was up 10 percent year-on-year, reaching €8.3 billion. Operating profit was down to €1.2 billion from €1.4 billion in the same period last year, owing to a restructuring hit of €600 million. The financial markets reacted positively to SAP's performance and confirmation of the widening restructure. Shares increased by as much as 7 percent on Tuesday following the news. Adjusted operating profit beat analysts' expectations. CEO Christian Klein told investors: "We continued to execute on our transformation program with great discipline with rehiring only for the skill sets we need. As you have seen, we are increasing the volume of the program. That's why we are able to announce an upgrade of roughly €200 million on the bottom line of our Ambition 2025." SAP has spent the last year integrating AI features into its business applications and development environment. Klein said that almost 20 percent of all deals in Q2 included premium AI use cases. The company said it bagged global oil and energy company ExxonMobil for its RISE with SAP program, designed to lift-shift-and-transform legacy on-prem software and processes to the cloud. Megabuyte analyst Nathan Jackson said SAP had maintained its strength in cloud growth across worldwide markets. "The current cloud backlog suggests a stable buying environment, which will be interesting to compare to the likes of Workday and ServiceNow when they report later this month." While management said it was prioritizing becoming a leaner business, the company also decided to buy workflow outfit WalkMe for $1.4 billion. "This more conservative cost approach isn't, however, flowing into underlying cash generation just yet, with the cost of redundancies being phased through 2024 into early 2025, hence we don't expect cash conversion from profits to return to an upwards trajectory until closer to 2026," Jackson said. ®